The latest annual construction industry market sentiment report, released by Arcadis and the Australian Constructors Association (ACA), highlights growing concerns over the impact of political decisions on project pipelines and the significant effects of the current industrial relations environment on construction costs.
ACA CEO Jon Davies pointed out that substantial real wage increases, coupled with stagnant productivity growth, are driving up construction costs and reducing the amount of infrastructure governments can afford to build.
“Higher labour costs and stagnating productivity growth are also diminishing the financial viability of commercial developments,” Davies noted.
The report reveals a stark disparity in wages between government and private sector projects, leaving the private sector struggling to compete.
A staggering 81 per cent of respondents reported either stagnation or decline in the residential construction sector.
Matthew Mackey, Executive Director of Cost & Commercial Management at Arcadis, emphasised the sector’s ongoing challenges: “Amidst the post-pandemic recovery, Australia’s construction sector continues to grapple with political turbulence and industrial strife, escalating costs and stifling productivity, which is threatening the very viability of projects and businesses.”
The report also raises concerns about declining market sentiment due to government cutbacks, commercial sector uncertainty, and delayed commencement of new energy initiatives.
Nearly three-quarters of respondents agreed that current contracts do not adequately and fairly allocate risk between contracting parties, a figure similar to last year’s survey.
Davies stressed the need for change, stating” “We can’t afford to continue with business as usual; project planning needs to be improved and construction costs need to be lowered to ensure the country can afford the infrastructure it needs.”
Key findings from the report include:
- Energy and Power (81 per cent), Water (71 per cent), and Defence (67 per cent) are the hottest sectors across the construction industry.
- 81% of respondents confirmed that the residential sector has either stalled or is in decline.
- 71% of respondents indicated the water sector is a rising market.
- Skilled trades, general labour, and consultant costs have held steady from last year with an average increase of approximately 5 per cent.
The ACA calls for increased collaboration to address project challenges and urgently improve industry productivity to ensure the sustainability of Australia’s construction sector.
